The wayward world of widgets

[ThomWV]

Its today and you are the owner of a small widget manufacturing company. Widget sales are down to 500 widgets a day and you aren't sure you can continue to employ your five widget-makers, each of whom is capable of producing about 125 widgets a day. Widget makers cost you about $100K per year in salary and overhead (a substantial portion of which is management cost, which happens to be your cut). As it turns out the Government will allow you to write off 100% of the cost of a new widget maker if you wish to buy one and this machine, which costs about $100k, can produce over 10,000 widgets a day when running at full power, but can supply all of your widget needs, now and into the future, while loafing along at its lowest setting. The automated widget-maker does not require a skilled widget maker to operate, just someone to check its oil periodically.

What do you do as owner of the Widget factory?

Now lets add to the situation, let's say you are given substantial additional tax cuts with which you might either buy this mighty machine or hire an additional skilled employee. What do you do?

[RUMMYisFROSTED]

1. What does a widget sell for?

:think:

[MilesColtrane]

2. Am I paying my employees' health care costs?

[RaleighNCDUer]

3. If widget sales are down to 500/day, why would you take a huge

loan, even with such an offer (remember, the write-off would not do anything until tax time the following year) to buy a machine that would up your production far beyond the demands of the market?

How about, instead, plowing a good portion of that 'management cost' into sales operations to increase the demand for your widgets, and you taking home 150k instead of 300k as your salary? I mean, are YOU down on the floor producing widgets yourself? What are you doing for your pay, other than 'owning'?

[Spike89]

4. Good question, and a sad simple answer

You really only have a choice between buying the widget making machine or going into the custom widget business. Assuming there is no custom widget market to speak of, you really have no choice. If you don't buy a widget machine, you won't be able to compete when your competitors drop wholesale prices to reflect their lower costs due to their widget machines.

If widgets are simple--perhaps identical to a common 16-penny nail--this exercise was completed almost 200 years ago. If widgets are more complex--perhaps identical to the vehicles many people drive--the decisions were mostly made a generation ago. If widgets are artistic or custom--perhaps identical to dress shoes--the decision is whether to go the high-end craft route or to buy the machine.

It is inevitable, we're moving toward black-box manufacturing of everything that can be mass-produced. Other than maintenance of the black-boxes, factories will be fully automated. Manufacturing will not be the occupation of the middle class of the future. If there is going to be a middle class, there will need to be something else. It is possible that craftmanship, artistry, and "white collar" jobs will expand, but I'm guessing we'll be flailing for generations to come to grips with a labor change that in many ways is more profound than the industrial revolution. As always, it will be the middle class that takes the big hit. Eventually, we'll be a bit like Star Trek, in that value will not come primarily from things but from ideas and skills. Although, I don't think it will be a money-free society. We'll still pay for skills (doctors, entertainers, teachers) and those with the most marketable skills will be able to use those advantages to get commodities and things (land, art, etc.) that are finite and non-manufacturable.

[L0oniX]

5. Widgets are evil. n/t